RTC and residential treatment billing for SUD and mental health programs.

Under HRI Managed, we verify benefits before the bed is filled and follow every authorized block of days through its concurrent review. Claims are built to the payer's code set for the level of care before they go out. Every day in your census is checked against the days authorized, billed and paid, by payer, so a gap shows up in the week it opens. Denied or stuck days go through our seven-point diagnostic.

Your exact numbers are set on a written quote after a billing review.

A residential day is billed as a per diem: one flat payment for a day of stay and treatment. There is no national rulebook for it. A 2021 report from ASPE, the policy office of the U.S. Department of Health and Human Services (HHS), says residential mental health and substance use settings are governed almost exclusively by state statutes and regulations. The code, the claim form and the authorization rule come from the state Medicaid agency, the managed care plan or the commercial contract.

Medicaid and the 16-bed rule. Federal regulation defines an institution for mental diseases, an IMD, as a hospital, nursing facility or other institution of more than 16 beds that is primarily engaged in providing diagnosis, treatment or care of persons with mental diseases. The test is the institution's overall character, whether or not it is licensed that way. Federal Medicaid money is not available for a person under 65 who is a patient in an IMD, unless the person is under 22 and receiving inpatient psychiatric services. CMS, the federal Centers for Medicare & Medicaid Services, wrote in 2017 that residential substance use treatment is ordinarily not eligible for federal Medicaid payment for that reason.

States have two ways around that limit: a section 1115 demonstration or managed care. For the demonstration, a 2017 CMS letter offered states federal matching money for services in residential substance use IMDs. A 2018 letter did the same for adults with serious mental illness and children with serious emotional disturbance. Both letters point to a statewide average stay of 30 days. The 2017 letter also asks states to hold residential providers to the American Society of Addiction Medicine (ASAM) Criteria or another nationally recognized standard. Under managed care, a plan can be paid a monthly capitation for an enrollee aged 21 to 64 in an IMD. The facility has to be a hospital or a sub-acute facility providing crisis residential services, and the stay has to be no more than 15 days in that month.

Whether Medicaid pays for an adult day in a large program depends on your state's authority. Nevada lists residential substance use treatment in an IMD as its own provider specialty and requires prior authorization for its residential codes.

Under 21, for mental health. Federal rules give youth psychiatric residential care its own Medicaid benefit. A psychiatric residential treatment facility, a PRTF, is a facility other than a hospital that provides psychiatric services to people under 21 in an inpatient setting. A PRTF has to be accredited by the Joint Commission, CARF, the Council on Accreditation or another accreditor the state recognizes. A team has to certify in writing that community care does not meet the youth's needs and that proper treatment requires inpatient services under a physician's direction. The same team certifies that the services can reasonably be expected to improve the youth's condition or prevent further regression. The facility also has to follow the federal restraint and seclusion rules.

Medicare. Medicare pays for inpatient psychiatric care through hospitals: psychiatric hospitals and psychiatric units of general hospitals. Care in a freestanding psychiatric hospital has a 190-day lifetime limit. Medicare's nationwide coverage rule for drug abuse treatment, its national coverage determination, covers inpatient hospital care and hospital outpatient department services. We found no Medicare benefit for a residential program that is not a hospital. Medicare does cover partial hospitalization and intensive outpatient programs.

Commercial insurance. A commercial plan pays residential days under the facility's contract with the plan. Tufts Health Plan's payment policy lists residential and detox services as a per diem, one unit a day. The contract holds the rate, the level-of-care definitions, what the per diem includes and how many days are approved at a time. No public document replaces it. Optum says its Fourth Edition ASAM changes are not effective for a facility until the facility has a fully executed, updated contract. Until then, Optum says, the facility should follow the Third Edition. Optum also says it sends an updated contract reflecting each level of care, which the facility signs and returns with a new service addendum and payment appendix.

For substance use, the levels come from ASAM. Its Fourth Edition, released in 2023, calls Level 3.1 Clinically Managed Low-Intensity Residential Treatment and Level 3.5 Clinically Managed High-Intensity Residential Treatment. It treats Level 3.7 as medically managed residential care. ASAM says a patient can receive Level 3.7 in a hospital, though most 3.7 programs are residential.

The Fourth Edition folded the Third Edition's separate withdrawal management (detox) levels into the main levels: 3.2-WM into 3.5 and 3.7-WM into 3.7. ASAM's assessment guide lists 3.1, 3.5 and 3.7 as the residential levels and does not list 3.3, but Ohio, Oklahoma, Iowa and New Mexico still write rules around 3.3. ASAM is not a regulator. A state's rules and a payer's contract can be on different editions at the same time. ASAM's FAQ says public agencies and payers decide if and when they use the Fourth Edition.

Mental health residential care has no single national level system. Some states set levels of their own. New Mexico, for example, organizes adult mental health residential care into three tiers under LOCUS Level 5, medically monitored residential services. Elsewhere, the payer's manual or contract sets the criteria it applies. For youth, the federal PRTF rules above are the frame.

For a claim, the level is four facts: the level your license allows, the level the patient was assessed at, the level the payer authorized and the level on the claim. Oklahoma wants the ASAM placement tool completed no more than seven days before an admission or an extension request. Washington's section 1115 waiver requires an independent assessment from an outpatient provider, who decides whether the patient meets the ASAM residential level.

A new residential program needs four things: a state license or certification, accreditation where it is required, Medicaid enrollment and a contract with each plan you want to bill. The order and the details are your state's.

License and accreditation. Before a program can bill Ohio's residential benefit, it needs certification by the state's Department of Behavioral Health for residential and withdrawal management substance use services. It also needs a Medicaid specialty for substance use disorder (SUD) residential facilities under provider type 95. In Oklahoma, a program needs certification from the state's mental health and substance abuse services department as a residential level of care provider and a contract with its Medicaid agency. Current accreditation from the Joint Commission, CARF or the Council on Accreditation is required there too. New Mexico requires accreditation from the same three bodies plus certification from its Behavioral Health Services Division, renewed every two years with a site visit. Iowa requires an active state license for the level of care and lists the Medicaid provider types that can bill each code.

Medicaid enrollment and the plans. Enrolling with the state Medicaid agency is separate from contracting with each managed care plan. Every plan decides for itself. Nevada tells its youth psychiatric facilities that contracting with the managed care organizations is the provider's responsibility. Virginia tells them to become credentialed and contracted with the youth's plan, or negotiate out-of-network, to be paid for the services the plan covers.

A voluntary credential. CARF runs ASAM's level of care certification for adult residential programs at Levels 3.1, 3.5 and 3.7. Optum calls it preferred but not required. Optum says certified programs are prioritized when it contracts under the Fourth Edition.

The unit for every code below is the day. Payers and state agencies print these codes for residential claims. Rates change and differ by payer. Any chart that pairs one code with one ASAM level describes one payer's setup.

The rule for counting a billable day varies by state. Nevada puts the discharge date on the claim and does not pay it. Indiana reimburses PRTF leave days at half the per diem when its conditions are met.

A per diem bundles the day. The payer sets what sits inside the bundle and decides what else can be billed on the same day. CMS's section 1115 letters do not pay room and board in residential facilities unless they qualify as inpatient. CMS says the Medicaid statute does not list room and board as a separate benefit, and that its rules count room and board as part of inpatient care. States handle room and board differently. Ohio's per diems do not include room and board. Washington pays it on H2036 with state-only funds. New Mexico pays a fixed daily amount for room and board from state general funds under H0047. That payment goes only to programs billing Medicaid fee for service, where the state pays the claim itself. Medicaid managed care does not reimburse it. A youth PRTF is the opposite case: Nevada's all-inclusive daily rate includes room and board.

What else bills beside the per diem on the same day depends on the payer.

For commercial per diems, the contract says what is inside, and it also settles which lines can bill beside the per diem.

Prior authorization approves the admission. After that, the payer's utilization review keeps checking that the stay is medically necessary, through concurrent review while the patient is in the bed. The payer approves a number of days, and your team asks for more, with the clinical record, before those days run out. ASAM says patients should be reassessed regularly and its transition and continued service criteria applied to decide whether they stay at a level or move.

For Medicaid managed care, federal rules say a state's time frame for a standard authorization decision may not exceed 7 calendar days for rating periods that start on or after January 1, 2026. An expedited decision is due within 72 hours. Either can be extended by up to 14 days in the ways the rule allows.

ERISA, the Employee Retirement Income Security Act, governs most private employer group health plans, and two lines of its claims rule bear on residential care. A plan that reduces or ends an approved course of treatment before its approved period is over has made an adverse benefit determination. ERISA uses that term for a denial, reduction or end of a benefit. The plan has to notify the patient early enough to appeal before the benefit stops. A request to extend treatment that is an urgent care claim must be decided within 24 hours, if it reaches the plan at least 24 hours before the approved days run out.

States and plans add their own rules on top.

Nine denial patterns recur on residential claims.

License, certification and accreditation come first, because they decide when a program can enroll. We prepare the Medicaid enrollment and plan contract requests and follow each one until it is decided. Before the first day is billed, we confirm with the state whether the program is paid as an IMD or under a youth PRTF benefit. The code set and claim form are confirmed at the same point. No claim goes to a payer until that payer confirms enrollment and an effective date. The new-program billing page covers the order of work and what to have ready.